Finally IntercontinentalExchange Inc. (ICE) completed the acquisition of NYSE Euronext Inc. (NYSE). This follows IntercontinentalExchange’s prior announcement of its agreement with NYSE to acquire the latter in Dec 2013. Shares of IntercontinentalExchange rose 1.0% to $199.84 on Nov 13 on the back of this news.
IntercontinentalExchange funded the $11.0 billion deal by letting out 67% in shares and 33% in cash, which was raised through cash and credit facilities. Last month, the company raised $1.4 billion through the 5-year and 10-year notes.
In Jun 2013, the European Commission gave its unconditional consent to the deal, while the US Securities and Exchange Commission (SEC) approved it in Aug 2013. However, the closure of the deal got deferred due to the delayed approval from other European regulators.
Both IntercontinentalExchange and NYSE businesses will continue to operate under their respective brand names, while the former will also progress on its plan to spin off the Euronext platform through an IPO, most likely scheduled for 2014. The Euronext platform consists of the exchanges in Paris, Amsterdam, Brussels and Lisbon. Earlier this year, NYSE Liffe’s both trading and clearing operations were successfully merged into ICE Clear Europe, creating an excellent clearing model.
Gaining Edge Through the Merger
Post-merger, IntercontinentalExchange is now armed with a market capitalization of $23 billion and comprises more than 4,000 employees. The 220-year old NYSE will own 36% in the 12-year old IntercontinentalExchange. The acquisition has further strengthened the company’s operational base to 16 global exchanges and 5 central clearing houses.
The takeover is expected to be a solid business combination. Alongside, the merger is expected to generate more than 15% of earnings accretion within the first year of completion of the deal. Management projects run-rate expenses synergies of about $450 million, which will be reaped in the second year of the merger.
The acquisition will provide IntercontinentalExchange with a strong competitive advantage by creating an end-to-end multi-asset portfolio and helping it diversify across the globe, while also vigorously tapping new opportunities in the emerging economies.
Moreover, with the culmination of the acquisition per agreement, the board of IntercontinentalExchange also declared a quarterly dividend of $75 million. This is payable on Dec 31, 2013, to shareholders of record on Dec16, 2013.
Nonetheless, with a majestic and high-scale business combination comes greater challenges related to integration of operations and absorption of expenses, while also creating strong operational and competitive efficiencies. Hence, we remain on the periphery to analyze the developments of the merged organization.
While IntercontinentalExchange carries a Zacks Rank #3 (Hold), outperformers in the financial industry include Hallmark Financial Services Inc. (HALL), Kemper Corp. (KMPR) and Brookfield Asset Management Inc. (BAM). All these stocks carry a Zacks Rank #1 (Strong Buy).
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